Watchdog: SEC Screwed Up on Madoff

"In a stinging new report, the inspector general for the Securities and Exchange Commission (SEC)reveals how the agency's "inexperienced" attorneys missed Bernard L. Madoff's colossal scam and believed Madoff's answers to their questions even when they were "seemingly implausible." Yet Inspector General David Kotz did not find any evidence of corruption at the agency - citing incompetence instead. "

"Kotz concludes that the agency's repeated investigations and clearing of Madoff served to increase Madoff's credibility with investors who believed that if the SEC had found no wrongdoing then Madoff's business had to be clean. "

"The report describes how Madoff tightly controlled who spoke to SEC investigators. In one meeting, a Madoff employee was yanked out of the room because she was "urgently needed." Later Madoff told SEC investigators the woman had to go to lunch."

"The report also notes that Madoff repeatedly intimidated SEC attorneys noting his relationships with the higher-ups at the agency even going so far as to say "that Madoff himself 'was on the short list' to be the next Chairman of the SEC." However, when SEC attorneys reported Madoff's repeated pushbacks to their superiors "they received no support."

"The inspector general notes that "at no time did the SEC ever verify Madoff's trading through an independent third-party." The report also notes that SEC attorneys investigated too narrowly and never "seemed to have considered the possibility that Madoff could have taken the money."

"The SEC investigated Madoff five times over 16 years and failed to detect the Ponzi scheme. Notably, even when SEC enforcement attorneys were handed a step by step roadmap of the Madoff scam by securities expert Harry Markopolos, they did not uncover the fraud that left thousands bankrupt overnight. "